Advanced Search
MyIDEAS: Login to save this paper or follow this series

Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States

Contents:

Author Info

  • Raj Chetty
  • Adam Looney

Abstract

This paper examines the welfare consequences of social safety nets in developing economies relative to developed economies. Using panel surveys of households in Indonesia and the United States, we find that food consumption falls by approximately ten percent when individuals become unemployed in both countries. This finding suggests that introducing a formal social insurance program would have small benefits in terms of reducing consumption fluctuations in Indonesia. However, in contrast with households in the U.S., Indonesians use costly methods such as reducing human capital investment to smooth consumption. The primary benefit of social insurance in developing countries may therefore come not from consumption smoothing itself but from reducing the use of inefficient smoothing methods.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w11708.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11708.

as in new window
Length:
Date of creation: Oct 2005
Date of revision:
Publication status: published as Ito, T. and A. Rose. Fiscal Policy and Management in East Asia: NBER East Asia Seminar on Economics 16. Chicago: University of Chicago Press, 2007.
Handle: RePEc:nbr:nberwo:11708

Note: PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  2. Susan Dynarski & Jonathan Gruber, 1997. "Can Families Smooth Variable Earnings?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 229-303.
  3. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 546-72, July.
  4. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(2), pages 305-46, April.
  5. Roger Gordon & Wei Li, 2005. "Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation," NBER Working Papers 11267, National Bureau of Economic Research, Inc.
  6. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  7. Browning, Martin & Crossley, Thomas F., 2001. "Unemployment insurance benefit levels and consumption changes," Journal of Public Economics, Elsevier, Elsevier, vol. 80(1), pages 1-23, April.
  8. Thomas, Duncan & Beegle, Kathleen & Frankenberg, Elizabeth & Sikoki, Bondan & Strauss, John & Teruel, Graciela, 2004. "Education in a crisis," Journal of Development Economics, Elsevier, Elsevier, vol. 74(1), pages 53-85, June.
  9. Paul Gertler & Jonathan Gruber, 2002. "Insuring Consumption Against Illness," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 51-70, March.
  10. Lisa A. Cameron & Christopher Worswick, 2003. "The Labor Market as a Smoothing Device: Labor Supply Responses to Crop Loss," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 7(2), pages 327-341, 05.
  11. Raj Chetty & Adam Looney, 2005. "Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies," NBER Working Papers 11709, National Bureau of Economic Research, Inc.
  12. Elizabeth Frankenberg & James P. Smith & Duncan Thomas, 2004. "Economic Shocks, Wealth and Welfare," Labor and Demography, EconWPA 0403030, EconWPA.
  13. Stefan Dercon, 2000. "Income risk, coping strategies and safety nets," CSAE Working Paper Series 2000-26, Centre for the Study of African Economies, University of Oxford.
  14. Paul Gertler & David I. Levine & Enrico Moretti, 2009. "Do microfinance programs help families insure consumption against illness?," Health Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 257-273.
  15. Thomas, D. & Beegle, K. & Frankenberg, E., 2000. "Labor Market Transitions of Men and Women During an Economic Crisis: Evidence from Indonesia," Papers, RAND - Labor and Population Program 00-11, RAND - Labor and Population Program.
  16. Frankenberg, E. & Thomas, D. & Beegle, K., 1999. "The Real Costs of Indonesia's Economic Crisis: Preliminary Findings from the Indonesia Family Life Surveys," Papers, RAND - Labor and Population Program 99-04, RAND - Labor and Population Program.
  17. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1727, Harvard - Institute of Economic Research.
  18. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, Econometric Society, vol. 62(3), pages 539-91, May.
  19. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392 Elsevier.
  20. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(5), pages 957-76, October.
  21. Robert Holzmann & Steen Jorgensen, 2000. "Social risk management : a new conceptual framework for social protection and beyond," Social Protection Discussion Papers 21314, The World Bank.
  22. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, American Economic Association, vol. 87(1), pages 192-205, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bruno Rocha, 2010. "At Different Speeds: Policy Complementarities and the Recovery from the Asian Crisis," Working Papers id:3294, eSocialSciences.
  2. Yasushi Iwamoto & Miki Kohara & Makoto Saito, 2009. "On the Consumption Insurance Effects of Long-term Care Insurance in Japan: Evidence from Micro-level Household Data," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd09-109, Institute of Economic Research, Hitotsubashi University.
  3. Kim Jungho & Alexia Prskawetz, 2009. "External Shocks, Household Consumption and Fertility in Indonesia," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 0604, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  4. Mathias Trabandt & Karl Walentin & Lawrence J. Christiano, 2010. "Involuntary Unemployment and the Business Cycle," 2010 Meeting Papers, Society for Economic Dynamics 129, Society for Economic Dynamics.
  5. Pande, Rohini, 2007. "Understanding Political Corruption in Low Income Countries," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp07-020, Harvard University, John F. Kennedy School of Government.
  6. Raj Chetty & Adam Looney, 2005. "Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies," NBER Working Papers 11709, National Bureau of Economic Research, Inc.
  7. Carlos Medina & Jairo Núñez & Jorge Andrés Tamayo, 2013. "The Unemployment Subsidy Program in Colombia: An Assessment," BORRADORES DE ECONOMIA 010393, BANCO DE LA REPÚBLICA.
  8. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367 Elsevier.
  9. Lawrence J. Christiano, 2011. "Comment on "Unemployment in an Estimated New Keynesian Model"," NBER Chapters, in: NBER Macroeconomics Annual 2011, Volume 26, pages 361-380 National Bureau of Economic Research, Inc.
  10. World Bank, 2006. "Making the New Indonesia Work for the Poor," World Bank Other Operational Studies 8172, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11708. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.